Question

_{Problem 3 Suppose you have the following value function: (x)2 for gains and v(x 3r for losses. 3a Suppose your reference point is zero, represent the value function graphically. 3b Suppose you get a 10 dollars raise, which you do not expect. What is the value of this raise to you? Suppose you get a 10 dollars raise, but you actually expect to have a 20 dollars raise, what is the value of this raise to you? Depict the two scenarios graphically.}

Answer 1